Articles in Category: Ferrous Metals

Glencore will sell off some of its zinc assets to pay down debt and SSI UK has shut down its Northeast England Redcar steelmaking facility.

Redcar Shuttered

SSI UK, Britain’s second-largest steelmaker, said on Friday it was halting operations at its Redcar plant in England, calling into question the future of its business and putting 2,000 jobs at risk. The company, a unit of Thailand’s largest steelmaker Sahaviriya Steel Industries said a sharp decline in steel prices had hurt its business.

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Our own Stuart Burns wrote that since the Thai company purchased Redcar in 2012, it has reportedly already lost $1 billion of its own money propping the operation up and racked up debts of a further billion.

Glencore To Sell Zinc Assets

Substantial amounts of zinc could be released onto world markets, weighing further on fast falling prices, as major producer Glencore PLC implements a plan to liquidate some of its commodity inventories to help pay off debt.

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As many expected, the Federal Reserve is keeping interest rates at record lows, due to, it says, a weak global economy, low inflation and instability in international financial markets.

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“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the Federal Open Market Committee said in a statement released at the conclusion of its two-day meeting this week.

Thanks A Lot, Global Equity Meltdown

In a press conference following the statement’s release, Fed Chair Janet Yellen said “the situation abroad bears close watching.”

I’ll say. We’ve been closely watching bears abroad (particularly in China) for some time now. Will this mean a continuation of the low metals prices we’ve seen lately? Only time will tell, but the Fed’s reticence comes after another week of falling metals and other commodities prices. Since the recovery here in the US has always seemed fragile, many say there is no sense in raising interest rates now that global equities markets have fallen sharply in the last month.

One Less LME Ring Trader

Meanwhile, JP Morgan Chase & Co. dropped out of the London Metal Exchange‘s open outcry ring this week, bringing the ring-trading tradition down to 9 members.


“Hey, you! I know you!” The LME’s one ring rules all trades. Image: The Wall Street Journal

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China’s steel futures fell to a record low in Shanghai recently and a major aluminum association has asked the US trade representative to step in to stop imports of Chinese semi-finished aluminum.

Aluminum Association Asks For Semi Intervention

The Aluminum Association, a US industry body, has called on federal authorities to investigate allegations that Chinese producers of the metal are improperly labeling their exports, flooding the market and driving down global prices.

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US aluminum producers have alleged that the Chinese have mislabeled exports as semi-fabricated aluminum products in order to evade an export tax on primary aluminum. These products, the US producers say, are often re-melted into primary aluminum further along in the supply chain.

The complaint by the Aluminum Association was sent in a letter dated September 4 to a unit of the US Trade Representative.

Chinese Steel Futures Fall to Record Low

Chinese steel futures fell to a record low on Monday amid tepid demand from the world’s top consumer of the steelmaking ingredient.

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The most-traded January rebar futures on the Shanghai Futures Exchange fell to 1,839 CNY ($288.94) a metric ton, the lowest since the contract began in early 2009, before edging back above 1,900 CNY ($298.53). The contract closed 1.9% lower at 1,920 CNY ($301.67).

China’s steel consumption typically improves in September and October along with construction activity after the summer lull. But a slowing economy may mute the pickup and cap any gains in prices.

If anyone in the US should ever accuse the steel industry of overreacting to the threat of imports and excessive domestic costs, they need only take a look at the UK.

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In the face of struggling domestic demand, the UK has gradually ramped up domestic costs for electricity to large industrial users like steel producers, piled environmental restrictions on plants and allowed cheap imports from places such as China to come largely unhindered into the market.

Declining Domestic Production

The result is most, if not all, of the UK steel industry is losing money and has done so for a number of years. According to a Telegraph article losses at Tata’s UK operations – the largest in the country – doubled last year to a staggering £768 million ($1.2 billion), while revenue and production fell.

Tata Steel has been struggling ever since it became the UK’s largest steel producer in 2007 with its $13 billion takeover of Anglo Dutch producer Corus, a deal that it must now deeply regret. In an effort to stay afloat, the company has continually slashed jobs and scaled back operations, reducing its European workforce from 25,000 to 17,000 in the process.

Tata has announced a further 700 job losses in Yorkshire and plans to mothball a plant in South Wales which will account for several hundred more job cuts. But even more dire is the state of Europe’s second-largest blast furnace at Redcar in Yorkshire. Sahaviriya Steel Industries, the Thai company that purchased Redcar in 2012 has reportedly already lost $1 billion of its own money propping the operation up and racked up debts of a further billion.

More Job Losses Coming

Now it looks like closure is just a matter of days away with the loss of some 2,000 direct jobs and a further 1,000 contractors as slab prices have plummeted from $500 to $300 per metric ton in the last year.

The UK steel industry has been in decline for decades, much like the rest of Europe’s steelmakers as the market has matured and lower-cost producers have sprung up around the world. But in recent years, the pressure has become acute due to a number of factors. First, electricity and power costs in the form of natural gas have risen sharply

Source UK Steel

Source: UK Steel

Electricity costs in particular are as much a result of the UK government’s switch to renewables with subsidy costs pushed onto consumers, as it is due to world energy prices. Read more

BHP Billiton‘s CEO called for more free trade and zinc has been quietly building in New Orleans.

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Mackenzie Supports Free Trade

Issuing what he described as a “call to arms” to global business, Andrew Mackenzie, chief executive of BHP Billiton, said he was concerned that non-tariff barriers to trade had grown since the 2008 financial crisis while finance and insurance had become more “insular.”

What’s With All the Zinc in New Orleans?

The latest stocks report from the London Metal Exchange showed another 26,600 metric tons of zinc being warranted at the port of New Orleans.

That brings the cumulative inflow to a massive 228,225 metric tons since the start of August.

The deluge of metal has transformed the LME zinc stocks landscape, Reuters’ Andy Home writes. The total hit a low point of 426,875 mt on Aug. 6, at which stage exchange stocks were down by almost 264,000 mt, or 38%, on the start of the year. As of today that year-to-date decline has been slashed to just 73,500 mt.

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Moreover, open tonnage of 553,075 mt is now at the highest level since December last year.


A court has called for a recalculation of sums underlying duties slapped last year on imports of steel pipes for the energy sector from South Korea, in a setback for domestic producers.

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The US Court of International Trade ruled on September 2 that the Department of Commerce should reconsider its calculation of profit, a key input in determining the level of duties.

The Commerce Department and the US International Trade Commission last year ruled that US-based steel companies, including United States Steel Corp., Maverick Tube Corp., Energex Tube, and the US subsidiaries of Russia’s TMK IPSCO and France’s Vallourec Star, were facing subsidized competition and “dumped” imports of oil country tubular goods. OCTG is a classification of tubes and pipes used mainly in oil and natural gas extraction.

South Korea was the biggest producer of allegedly subsidized OCTG in the case, which also covered imports from India, Taiwan, Turkey, Ukraine and Vietnam.

Commerce set duties on imports from South Korea’s Hyundai Hysco at 15.75%, Nexteel at 9.89% and all other South Korean producers at 12.82%. The companies argued the duties were too high.

“Commerce’s Final Determination is remanded in part … for it to reconsider its calculation,” the Court of International Trade said, although it upheld other parts of the decision.

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Commerce has until Nov. 2 to respond but, if the ruling stands, it’s a victory for the importers and another costly loss for US steel companies in the always expensive anti-dumping process. If the duties on the South Korean producers end up below 8% they likely would not be stiff enough to discourage use by oil and natural gas companies looking to keep their costs down. Many of these products are being sold below cost thanks to subsidies.

A lockout continues for a major specialty steelmaker and China’s copper output is tapering off after the stock market crash there.

USW Says ATI Won’t Return to the Table

The United Steelworkers of America said it’s made another effort to get Allegheny Technologies Inc. back to the bargaining table but the Pittsburgh-based specialty steel company is sticking with its “last, best and final offer,”  which was made more than a month ago, before the five-week-old lockout began.

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USW Vice President Tom Conway said in a release that the union, which represents 2,200 members at 12 Allegheny Technologies’ (locations, met with company representatives on Friday and made a proposal. ATI did not respond.

Chinese Copper Production Slowing Down

China’s production of refined copper inched up just 0.2% in August, after having tumbled in the previous month as smelters restricted metal output due to weak prices and reduced supplies of raw materials in the domestic market.

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Refined copper production stood at 664,954 metric tons in August, compared with 663,520 mt in July, data from the National Bureau of Statistics said on Tuesday.

It’s been a wait of about 3 years but Vedanta’s iron ore operation in the Indian province of Goa is finally set to resume exports, mainly to China. After the monsoon ends, other miners, too, are all set to restart mining.

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Representatives of steel manufacturing mills from China’s Jiangsu province and Tangshan area recently visited Goa to discuss the modalities with officials of Sesa Iron Ore, a subsidiary of Vedanta.  Sesa Iron Ore announced the resumption of iron ore extraction at its mine in Codli, 80 kilometers south of Panaji, Goa’s Capital, and once Asia’s biggest iron ore mining site.

Resumption of Ore Extraction

The current environment clearance limit for the mine is around 3 million metric tons a year, scaled down from earlier limit of 7 million metric tons. Before the mining halt, China was the biggest market for Goa’s iron ore. The extraction activity in Goa was stopped after the state government suspended mining leases due to illegal activities. Later, the Supreme Court of India banned it until April 2014. Recently, the Goa government renewed many of the leases, paving the way for resumption of iron ore extraction.

While the Chinese may be back, in Goa at least, and with more capacity added to the overall iron ore stock, the larger question being debated by iron ore analysts and mining companies in India and around the world is – will there be a revival in Chinese demand for ore? Are they back?

What About the Majors?

Mining major Rio Tinto, for example, recently reiterated its claim that Chinese steel production would reach 1 billion tons, soon, and also forecast renewed demand for iron ore and steel from other emerging markets in the next 15 years.

Rio may still have faith in the China growth story but competitors such as BHP Billiton and Fortescue Metals Group think otherwise. A few days ago, BHP said it had lowered its expectations of Chinese steel production.

Like Vedanta’s Goa mines, a few others around the world are preparing to add to the ore supply. India’s Essar Steel, for example, is hurrying up construction in Hibbing, Minn., of a $1.9 billion mining and processing facility.

But what effect will the increase in ore supply have on the already spiraling iron ore prices, globally?

Earlier this year, iron ore prices fell to historic lows. Overall, ore prices have plummeted around 70% since hitting a peak in 2013, hurting big exporters such as Australia. A majority of analysts are of the view that the iron ore mining sector is unlikely to recover anytime soon, especially since the Chinese economy shows no major signs of recovery.

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There’s been a brief rally in iron ore prices sending hopes soaring in some quarters. In the last days of August, Standard & Poor’s revised upward its price “assumption” for the year to $50 from the earlier forecast of US $45 per mt, but added that the imbalance in supply and demand would remain for another two years. Others expect prices to slide later this year and the next, and probably it would stabilize at $50 a year.

BHP Billliton has revised its prediction of “peak steel” in China and an inner-OPEC oil price fight has broken out.

BHP Changes Peak Steel Forecast

BHP Billiton last month revised downwards its forecast of “peak steel” production in China, the world’s largest producer of the stuff. Reuters’ Andy Home writes that It will happen, BHP said, some time in the mid-2020s and the peak will be between 935 and 985 million metric tons, or 960 million in the middle of that range.

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Rio Tinto, by contrast, is sticking with its call that the peak will come around 2030 and will be around 1 billion mt.

Kuwait, Iran Undercutting Saudi Oil Price

Kuwait and Iran have cut their crude oil prices to Asia to multi-year lows against top exporter Saudi Arabia as the battle for market share among producers pits members of the Organization of the Petroleum Exporting Countries against each other.

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Kuwait, one of the lowest-cost producers, cut its October price to Asia by 60 cents compared with the previous month, undercutting a reduction for a similar Saudi grade. This pulled Kuwaiti oil to its biggest discount to Saudi crude in over a decade, at 65 cents a barrel.

metal train derailed

China demand has derailed ferrous scrap exports from the US.

At Day 2 of ISRI’s Commodities Roundtable 2015 conference, panelists got down to brass tacks.

And by brass tacks we mean, more aptly, ferrous-metal tacks (although the Copper roundtable also took place, so surely there was mention of brass tacks, even if indirectly).

Anyways, ferrous materials represent the largest piece of the scrap market pie as far as US industry is concerned, and panelists made no bones about the fact that US ferrous exports are down – especially to China.

Even before the Ferrous roundtable got going, Joe Pickard, ISRI’s chief economist and director of commodities, made note of the fact earlier in the day that China’s slowdown is concerning to the overall industry picture.

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As far as US ferrous scrap exports to China, “we’ve already been seeing some writing on the wall,” Pickard said.

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